Contract Brewing: PEELING THE ONION WITHOUT TEARS Michael Comerton michael@pomegranate.asia
Personal history Pomegranate: contract brewing company Platinum: craft beer brand in Vietnam contract brewed
Well established in other fields Ancient history of equipment contracting & sharing for agricultural operations such as Winemaking & Olive oil production Ancient Egyptian wine press
Contract winemaking Today, contract winemakers service both small and large growers for similar reasons to brewers: economies of scale associated with small production do not justify building or equipping separate wineries Located close to particular grape-growing region large wine companies, whose production facilities have been stretched due to increasing volumes facilities are fully utilised or timing issues during vintage The oxford companion to wine, ed Jancis Robinson
What is contract brewing? Typically, a bricks-and-mortar brewery brews beer for another business, which lacks its own brewing facility or sufficient brewing capacity. The difference between contract and licensed brewing: Contract brewing - A business that hires another brewery to produce some or all of its beer. The contracting business then sells the beer. Licensed brewing A license is provided by a brand owner that allows another brewery to produce beer under its brand. The licensed business then sells the beer.
Caution on consumer perceptions Byron Bay Lager + CUB = $20,000 fine for deception Camden Town brewed in Germany & Belgium but website said: When ordering beers for the Horseshoe we had to get the lager and wheat beer from Germany and the pale ales from America. Why wasn t anyone making them in London? Why couldn t we get great examples of those beers made around the corner from us? So we decided to be the one to do it; to make the beers we really wanted to drink and to do it in Camden Town. Brewdog - Punk IPA contract-brewed at Thwaites In the past we have sometimes not always had every ingredient listed on the label and although we were open on our blog when we made a small percentage of our beer off site in 2011 & 2012, this was not always reflected on our packaging. With our new brewery all our beer is now made in house. However the above raises the bar for everyone, including ourselves.
Ensure the consumer feels informed! Blogger, Dave S: As far as knowing where exactly a beer was brewed goes including stuff like the Thwaites / Punk IPA thing, or Sheps contract brewing Asahi as well as this Camden kerfuffle I don t care that much where something was brewed, but I d question the motives of brewers who go out of their way to hide it.
Key benefits of contract brewing For brewery owner: contract brewing can take up some excess capacity, or help fund a planned expansion albeit with reduced margins For person seeking someone to make beer for them: Reduced capital cost requirements Reduced overhead Legal compliance Space limitations Geographic benefits Production & packaging options Quality Speed to market
Key questions Should we raise capital / increase debt or outsource production to another brewery with excess capacity? When do we need to launch / meet the new demands? how long would it take to source, install & commission a brewery?
Cost Benefits Limited Capex: use the capital for additional brand building and marketing activities to yield a higher return on investment Reduced risk of product launch & establish brand identity before committing to building your own brewery Reduce other costs & liabilities: Land purchase / rent, staff & operating costs Pricing produce more efficiently at contract brewer (economies of scale & newer / faster packaging)
Geographic Benefits Expand geographic presence tap into market closer to contract brewer freshness save on shipping costs & carbon footprint Beer is made up of water, and the island of Hawaii has been in a drought for decades,... Brewing closer to market has eliminated 800k miles and saved 1.5kT of CO 2, the equivalent to taking 319 cars off the road for a year. Mattson Davis, Kona
Speed & space Benefits Speed Speed to market launch finding site brewery procurement construction & commissioning licensing, Expand production quickly meet the needs of fast growing brands fulfil an unexpectedly large order from a large client such as an exporter, supermarket or pub chain Space Overcome space limitations at current location
Legal Benefits Production in countries with difficult legislation E.g., Platinum in Vietnam Localised legal requirements E.g.s, Due to Texas state law, Houston s St Arnold Brewing brews the beers for the Texas locations of California s brewpub chain BJ s restaurant & Brewhouse Byron Bay Brewing found it difficult to expand and was unable to install a bottling line on site due to zoning and local Council requirements
Packaging Options
Quality Benefits Quality Access to better equipment & laboratory for quality & consistency Brewing closer to the consumer to preserve freshness Experienced brewers to consult for advice
Who would seek contract brewing? Start-up brewing companies Frees up early capital to build demand and brand loyalty and actually generate revenue before embarking on a fundraising and building program for a new brewery = reduced risk & faster timelines E.g., Two Birds & Boatrocker, Melbourne The ability to contract brew meant that there was a reduced risk associated with getting our company off the ground, Jayne Lewis Gypsy brewers building alternative brands E.g., Mikkeller Brewpubs looking to begin/expand packaged beer without the need for space or significant investment E.g., Four Pines & Lord Nelson, Sydney
Who would seek contract brewing? Existing breweries that already produce and distribute but: Are expanding and need additional capacity as an interim solution during relocation or upgrades of current facilities Need additional capacity for specific large brands E.g., BrewDog, Mountain Goat Want to produce more of their beer closer to where it is sold (reduce shipping footprint & improve freshness) E.g., St. Feuillien brew Green Flash in Belgium for European distribution, Coopers brew Brooklyn Brewery beers in Oz Need specialized equipment E.g., centrifuges, barrel rooms, can line
Models
Models of contract brewing Turnkey recipe, procurement, production, packaging & shipping all provided for a fixed price E.g., private label such as ALDI s Rivet Lager, Bach Brewing Production - Beer brewed & packaged according to your specifications E.g., Boston Beer (Sam Adams), Pabst, EPIC Oversight Beer brewed according to your recipe and you re present to oversee each production batch E.g., Pasteur & Platinum, Vietnam Packaging - using contract brewer for packaging (with or without brewing) E.g., brewpubs such as Four Pines & Lord Nelson, Sydney Mixed model brew some brands at own brewery and other larger brands under contract E.g., Mountain Goat Summer Ale brewed & canned under contract
Models of contract brewing Brewery rental - brewers that contract the equipment and labour, leaving the responsibility of recipe development and ingredient sourcing to themselves. E.g., Bison brewing, California; Notch brewing, Massachussetts Tenant / Gypsy brewer Equipment rental at existing brewery with your labour E.g., Pretty things beer & ale project, Mikkeller, Evil Twin Alternating proprietorship US format - host brewery lends its facilities to another brewer that legally owns both the facilities and the beer (& its ingredients) for the duration of production, holds its own permits, and pays excise duties according to its own barrelage. E.g., 21 st Amendment brewpub, San Francisco Investing in equipment (tanks, centrifuge, packaging, ) at another brewery and using its other infrastructure (services, brewhouse, ) E.g., High Water Brewing, California
Summary
Michael Comerton michael@pomegranate.asia Thank you